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As the housing affordability crisis becomes a growing political focus, Kevin Warsh, President Trump\u2019s pick to chair the Federal Reserve, has said he believes the central bank can use its monetary policy powers to help bring down mortgage rates.<\/p>\n
\u201cWe can lower interest rates a lot, and in so doing, get 30-year fixed-rate mortgages so they’re affordable, so we can get the housing market to get going again,\u201d Warsh, a Fed critic and former member of the central bank\u2019s board of governors, told Fox Business last year<\/p>\n
Warsh\u2019s comments echo views held by Trump, who has repeatedly attacked outgoing Chairman Jerome Powell for being \u201ctoo late\u201d to cut interest rates, hurting consumers. By installing Warsh, Trump hopes to have a chairman who is more willing to swiftly lower interest rates but still command the respect of Wall Street.<\/p>\n
Read more: <\/em>How to get the best rates right now<\/em><\/p>\n When it comes to mortgage rates, the Fed doesn\u2019t directly control them, though its interest rate decisions can influence their direction.<\/p>\n Often, if a central bank opts to keep benchmark rates low when inflation remains hot, long-term yields move higher, a sign that investors are concerned about inflation down the line. That scenario can end up pushing mortgage rates higher, due to their close relationship with the 10-year Treasury yield.<\/p>\n \u201cAn explicit focus on cutting its policy rate to lower longer-term rates could backfire,\u201d Realtor.com senior economist Jake Krimmel said in a statement.<\/p>\n However, that explicit focus on the federal funds rate is exactly what Trump cites repeatedly in his expectations of a new Fed chair. And lately, he\u2019s been tying the rate issue to home affordability.<\/p>\n \u201cWe\u2019re going to make it easier to buy, we\u2019re going to get interest rates down,\u201d he said Thursday during a Cabinet meeting.<\/p>\n Read the latest updates and reactions to Trump’s Fed chair pick<\/em><\/p>\n\n Bill Banfield, chief business officer at mortgage company Rocket, noted that Warsh has criticized the size of the Fed\u2019s holdings of Treasuries and mortgage-backed securities. Policy that gradually shrinks the central bank\u2019s balance sheet, alongside lowering short-term rates, could lead to stable or slightly lower mortgage rates, Banfield said.<\/p>\n \u201cWhere funds go or don’t go along with inflation expectations will drive the outcome for mortgages,\u201d he wrote in a post on LinkedIn on Friday.<\/p>\n Housing affordability is a complex problem involving both housing supply and demand. Powell repeatedly said he viewed affordability as primarily a supply issue, which is outside the Fed\u2019s purview.<\/p>\n But lately, Trump has said he\u2019s reluctant to support any policies that might push prices down for homeowners, leaving mortgage rates as a major tool in his affordability push.<\/p>\n<\/p><\/div>\n